Legal Marijuana’s Unintended Business Opportunities

Wall Street Journal

The law of unintended consequences looks to be in force in the marijuana industry, where businesses that expect booming demand from marijuana users are among the opponents of legalization, while those who are pioneering the industry may be crushed by the more liberal laws they favor. The picture of risk and opportunity is a swirl of incongruities.

Reuters

It seems logical enough when proponents of legalization say that their opponents are acting out of economic self-interest. “The two biggest opponents we tend to see are folks in law enforcement and people within drug treatment and drug testing. Both of them stand to lose economically,” said Mason Tvert, director of communications for the Marijuana Policy Project, in an interview. MPP is a political action organization whose website envisions “a nation where marijuana is legally regulated similarly to alcohol.”

Yet those very opponents identified by Mr. Tvert say on the contrary that they expect a surge in business from legalization. “I feel I was speaking against my financial interests when I spoke out against legalizing,” said Dr. Christian Thurstone, associate professor of psychiatry at the University of Colorado and an addiction-treatment professional at the Denver Health Medical Center. “95% of our treatment referrals are for marijuana addiction. Business has really been booming here,” he said.

“Legalization concerns me from a human perspective, but not as a threat to our business,” agreed Deni Carise, chief clinical advisor of Sierra Tucson, a provider of addiction treatment and behavioral health services. Citing studies showing that around 10% of those who use marijuana will develop a dependency problem, she said, “I’m concerned for our citizens, more people using it means more people will have problems, but I don’t see it as cutting into our business.”

Contrary what some proponents of legalization say, drug court and law enforcement-related enterprises may also have little to fear from more tolerant marijuana laws. Christopher T. Lowenkamp, a lecturer in criminology and criminal justice at the University of Missouri Kansas City, recently analyzed crime statistics for Colorado and found crimes against persons up sharply since marijuana legalization there.

Noting that this analysis contradicts a number of reports of falling crime, Mr. Lowenkamp explained in an interview that such reports relied on FBI Uniform Crime Reports Part 1, which addresses the most serious crimes, but not lesser crimes, such as assault, criminal trespass, domestic violence, prostitution, and so forth. Looking at statistics for these crimes from the National Incident Based Reporting System, he saw a sharp increase. For example, he wrote, “When we isolate simple assault and domestic violence assault…we see a clear upward trend over the last five years, and a marked uptick from 2013 to 2014 (+64% for simple assault; +96% for domestic assault).”

While legal marijuana would mean no one will go to court because of marijuana possession, things done under the influence are another matter. “If legalization continues in the direction it’s going, drug courts are going to get more people, and treatment centers are going to get more people,” said Douglas B. Marlowe, chief of science, law and policy at the National Association of Drug Court Professionals, who advised, “If I were looking for a business, I would be buying up drug treatment centers.”

If drug courts and drug treatment have little to fear from legalization, what businesses are at risk? Paradoxically, marijuana entrepreneurs. “I think a remarkable number of fortunes are going to be lost in the legal marijuana trade,” said Mark A.R. Kleiman, a professor and drug policy expert at the University of California Los Angeles, “The stock promoters are going to do well but I think the investors are going to get fleeced.”

Jonathan P. Caulkins, a professor at Carnegie Mellon University, explained that “The industry has had a lot of operations with one plant lover cultivating 50 plants and able to enjoy an upper middle class income. Those folks will be road kill.” As the marijuana industry develops, economies of scale will favor big operators, he said, predicting, “It will probably be some number of years, maybe five-ish, before you have an industry shake-out and less efficient producers driven out because prices fall.”

Looking ahead to the prospect of legalization at the national level, Professor Caulkins foresees a competition to determine which state will host the industry. “Any single state in the country can easily produce all the cannabis for the entire country,” he explained. State competition to host the industry might focus on water availability or climate, especially if economical outdoor cultivation becomes the norm. If indoor cultivation under artificial lighting prevails, states with lower power costs would have an advantage. Taxes could also tilt the competitive playing field.

Mr. Tvert of the Marijuana Policy Project disputes the industry-shakeout thesis, noting that the beer industry has room for both major brewers and craft brewers. “The same is the case with marijuana.”

“Right now it’s a very complex market, and there isn’t a move to large industrial operations, and that’s not going to change unless there is change in the law at the federal level,” said Taylor West, deputy director of the National Cannabis Industry Association.

Gregory J. Millman is a senior columnist with Risk & Compliance Journal He is the author of The Vandals’ Crown: How Rebel Currency Traders Overthrew the World’s Central Banks, and several other books. He can be reached at +1 (212) 416-2352 or by email at gregory.millman@wsj.com Follow on Twitter @GregoryJMillman.

Comments (5 of 5)

Alcohol does not kill people. People kill people. The same will be true with pot. Pot=the great ambition killer.

11:54 am August 4, 2014

jar1807 wrote:

Why bother legalizing marijuana? Skip this baby stuff glamorized by 1960's castoffs. I'm waiting for some good Crank to become universally available for the same reasons as weed.

5:05 pm July 31, 2014

William Clark wrote:

Thanks for the chance to add a comment here.

I'm convinced that prohibition of marijuana is a premise built on a tissue of lies: Concern For Public Safety. Our new laws save hundreds of lives every year, on our highways alone. In November of 2011 a study at the University of Colorado found that, in the thirteen states that decriminalized marijuana between 1990 and 2009, traffic fatalities have dropped by nearly nine percent—now nearly ten percent in Michigan--while sales of beer went flat by five percent. No wonder Big Alcohol opposes it. Ambitious, unprincipled, profit-driven undertakers might be tempted too.

Actually, most people--and particularly patients who medicate with marijuana--use it to replace prescription drugs or alcohol.

I recently reviewed the Federal Census stats on yearly driving fatalities state by state, from 1990 to 2009. All states, 'legal' or not, have seen their death rates drop, but on average, those with medical laws posted declines 12% larger than the non-medical states. Public Safety Announcements and vehicles with airbags must have helped as well, consistently throughout the country, without affecting the disproportion between the 'legal states' and those 'not yet, in 2009'.

In 2012 a study released by 4AutoinsuranceQuote cited statistics revealing that marijuana users are safer drivers than non-marijuana users, as "the only significant effect that marijuana has on operating on a motor vehicle is slower driving", which "is arguably a positive thing". Despite occasional accidents technically classified (and eagerly reported by police-blotter ‘journalists’) as ‘marijuana-related’, when in fact a mix of substances was involved. Alcohol, most likely, and/or prescription drugs, nicotine, caffeine, meth, cocaine, heroin, and a trace of the marijuana passed at a party last week. But on the whole, as revealed in big-time, insurance-industry stats, within the broad swath of mature, experienced consumers, slower and more cautious driving shows up in significant numbers. Legalization should improve those numbers further.

Marijuana has many benefits, most of which are under-reported or never mentioned in American newspapers. Research at the University of Saskatchewan indicates that, unlike alcohol, cocaine, heroin, or Nancy (“Just say, ‘No!’”) Reagan’s beloved nicotine, marijuana is a neuro-protectant which actually encourages brain-cell growth. Research in Spain (the Guzman study) and other countries has discovered that it has tumor-shrinking, anti-carcinogenic properties. These were confirmed by the 30-year Tashkin population study at UCLA.

Drugs are man-made, cooked up in labs, for the sake of patents and the profits gained by them. They are often useful, but typically come with cautionary notes and lists of side effects as long as one's arm. 'The works of Man are flawed.'

Marijuana is a medicinal herb, the most benign and versatile in history. “Cannabis” in Latin, and “kaneh bosm” in the old Hebrew scrolls, quite literally the Biblical Tree of Life, used by early Christians to treat everything from skin diseases to deep pain and despair. The very name, “Christ” translates as “the anointed one”. Well then, anointed with what? It’s a fair question. And it wasn’t holy water, friends. Holy water came into wide use in the Middle Ages. In Biblical times it was used by a few tribes of Greek pagans. But Christ was neither Greek nor pagan.

Medicinal oil, for the Prince of Peace. A formula from the Biblical era has been rediscovered. It specifies a strong dose of oil from kaneh bosom, ‘the fragrant cane’ of a dozen uses: ink, paper, rope, nutrition. . . . It was clothing on their backs and incense in their temples. And a ‘skinful’ of medicinal oil could certainly calm one’s nerves, imparting a sense of benevolence and connection with all living things. No wonder that the ‘anointed one’ could gain a spark, an insight, a sense of the divine, and the confidence to convey those feelings to friends and neighbors.

What gets to me are the politicians, prosecutors, and police who pose on church steps or kneeling in prayer on their campaign trails, but can’t face the scientific or the historical truths about cannabis, Medicinal Herb Number One, safe and effective for thousands of years, and celebrated by most of the world’s major religions.

4:46 pm July 31, 2014

Behind the Redwood Curtain wrote:

Follow the money. I live in MJ land ground zero. Law enforcement finds huge wads of cash and valubles at most busts that they can legally confiscate and use the proceeds.
The big growers like the illegality too, of course because it keeps the price high.
Regulation like CO keeps the price high.
High prices cause crime.
The best solution might be to REQUIRE all MJ users to grow their own.

2:49 pm July 31, 2014

Jillian Galloway wrote:

Relaxing with a beer or socializing over a couple of wines are natural, enjoyable things to do, however it's important to remember that alcohol is a far more harmful and more addictive option for these purposes than is marijuana. According to the CDC alcohol kills 80,000 people/year in the U.S. while marijuana kills none. Marijuana *doesn't* cause liver disease, heart disease, brain damage, cancer of any type, emphysema or death, and its addictive potential is only about that of coffee.

So why do law enforcement and drug treatment organizations seek to make us LESS safe by denying us the right to choose marijuana instead of alcohol?

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